On Thursday this week at the Oireachtas Committee of Public Accounts hearing, the NAMA CEO Brendan McDonagh confirmed that NAMA has now paid €5.6bn of state aid to the banks when it acquired €74bn of loans for which it paid €32bn. Despite what the NAMA CEO “categorically” said, NAMA did pay more than the loans were worth, there was an overpayment of €5.6bn, though there is no suggestion – at least not here! – that NAMA didn’t assiduously follow the valuation methodology agreed with the European Commission. It should be noted that property values in NAMA’s main market, Ireland, have declined by a further 20-30% since NAMA’s valuation date of 30th November 2009, and indeed NAMA has itself declared a cumulative loss in 2010-2011 of just over €1bn. So the €69.7bn excludes further losses at NAMA.

And it also excludes the interest that we will need pay on loans generally, obtained to fund the bailout. Or the lost profits that we would otherwise have made on the National Pension Reserve Fund which we depleted to rescue the banks.

Is all of that money gone?
On the other hand, the State has received some benefit to date from payments from the banks for the state guarantee that was first given in September 2008 and extended on limited terms since. These payments have so far totalled €3.1bn. And there are our shareholdings in the banks – 100% of IBRC, 99.8% of AIB/EBS, 99% of ILP and 15% of Bank of Ireland – and these shareholdings also have an overall value. How much? The National Pension Reserve Fund is valuing our shareholding in Bank of Ireland and AIB at €9.4bn, though that is being subjected to what the NPRF calls an “independent review”. What value our control over IBRC? Although the IBRC CEO Mike Aynsley and chairman Alan Dukes have in the past claimed that the Anglo component of IBRC may only cost €25bn compared with the €29bn bailout, indicating the State may get back €4bn, given we are five years plus from winding down IBRC, it would not be prudent to rely on those claims from officials who constantly underestimated the financial horror of Anglo in 2009/10. What about Irish Life and Permanent which has cost us €4bn so far? Difficult to say, and at this stage, the concern on here with ILP is that the €4bn bailout will need additional funds from us.

Can the cost increase even further?
You betcha it can! Our property markets are far from stable, our economy is bouncing along the bottom – at best – and the EuroZone continues to lurch from one crisis to the next. Unemployment is trending upwards, we’re in a double-dip recession and the domestic economy is overall moribund. Industry sources suggest the recent sale by GE Money of its Irish mortgage loanbook to Australian outfit, Pepper Home Loans was at 35c – even less than the 40c estimated on here – in the euro. Okay, GE was a subprime lender and was active during the boom, so its loan book will probably be at the very top end when it comes to impairments, but suspicions linger that even our pillar banks may come in for further major losses on Irish mortgage lending. The first draft of the Personal Insolvency Bill published last week appears to weigh the advantage in the borrower-lender relationship on the banks’ side, but it remains to be seen what amendments are made as the Bill goes through its stages in the Oireachtas. NAMA is complicated because it starts out with a €5.6bn handicap and property prices in Ireland have declined since November 2009, the NAMA valuation date. However, NAMA’s loss won’t need be accounted for nationally until 2020 when the Agency is scheduled to wrap up, but even so, we can see that NAMA is in a bit of a hole today, and the immediate outlook for the Agency doesn’t look great. NAMA’s performance later on this decade will depend on the economy overall, so it is probably too early to project, and you can dismiss NAMA’s recent “we will break even” – NAMA doesn’t have a superior crystal ball!

But what about the EU summit?
A week on from the game-changing EU summit, we are no wiser as to what relief, if any,Ireland can look forward to from any new initiative. But studying the media in Germany and other financially healthier countries, it is difficult to see any gift in prospect. We may see some relief on interest on borrowing to fund the promissory notes, but that interest is not even accounted for in the €69.7bn; we may see the ESM acquiring our shares in the covered banks, but the ESM is unlikely to be able to pay in excess of the market value of those shares, and the market value is uncertain and the view on here is that there is downside to any current valuation.

“Transferring the debt away from the sovereign would have the effect of bolstering Ireland’s hopes of returning to normal lending markets next year. It appears unlikely that 100 per cent of the debt will be transferred but some reports indicate that around half of it might be.

Hayes said that “negotiations are best done in private” but said that the government was “not putting figures on it” adding: “We have been working up different options… the hard work starts now”.

Fianna Fáil’s Timmy Dooley told the same programme that it was “now up to the Irish government to put a very strong case on the basis of equal treatment” saying that the same deal done for Spain should also be applied to Ireland.

Asked if this meant a full reimbursement of the €63 billion that had been poured into Ireland’s banks, Dooley said it was the “least we would expect”.

“I think that’s the obvious follow through from separation of bank recapitalisation from the sovereign which now appears is going to apply to Spain and every country that follows hereafter,” he said.”

Mr Dooley should read Article 20 of the ESM Treaty and think about how 500bn divides between the ESM’s supposed aims.

The more I watch what is happening in the Irish economy, the more I think of my Saturday mornings at the cinema. I watched old movies where the Three Stooges were in charge of the town. Fire alarms going off as the banks are robbed and the comedians turning the hoses on the general populace of the town and themselves, rather than on the crooks and the burning buildings.

It amazes me that one of the major financial scandals of our time received scant reporting in the Oirish media. The LIBOR price fixing has serious implications for all bank customers – not just the big banks. Like most big successful scandals, it took so many decades to come out. The guilty parties are going to be everywhere, not just in London. LIBOR sets interest rates for €300 trillion in bonds and debt. The regulators participated. The central banks, whose job it is to manipulate rates, asked for help to do their work. In Ireland we have yet to have our own scandal involving the manipulation of DIBOR rates, they were known by the insiders as “TIBOR” for reasons that may eventually surface when our financial media actually qualify as investigative journalists. Perpetrated by Anglo in its glory days on its customers, the cost has yet to be counted in the price of bailing out the banks.

In relation to the EU summit – Spanish debt went back over 7% on Friday, only one week after the EU pledged to backstop Spain, no matter what. It seems the EU leaders no longer have much credibility with global investors. Imagine that! Twenty failed euro economy rescues in a row and counting. They can no longer be taken seriously.

The IMF link referenced above is a real reminder that size, the way out of proportion size, of the loans from banks in Ireland and Iceland caused massive damage.(It’s obvious now, duh)
Tiny, tiny countries with big swinging hanging banks. Lordy me…and if the money hadn’t been thrown at developers it probably would of been thrown at astronauts or Camogie players or something equally unpalatable. It’s obvious now.
Tiny, tiny countries with big huge banks. Yep.. seen something like that before.

also @wstt I agree that this is a great story, always unfolding, billions, deceit, mystery, nwl, of national importance to say the least….addictive stuff…simmering though almost reluctant to boil over, but it has to eventually.

In early-2009, it was possible to identify c.€150B of loan assets within the guaranteed institutions, which assets comprised speculative or so-called “development” loans. As, I believe, we would all generally agree, at that time the underlying value of the land &c in play within such ventures was set to fall by about 60% at least.

Because so many of these ventures were 100%+ financed, it was easy to anticipate that the average loss on the loan assets would be of the same order.

On this basis, it was possible then to anticipate that total losses within the guaranteed institutions would be of the order of €90B, thinking only of such speculative ventures.

Sadly this estimate did not include for the further losses experienced within certain classes of asset, not to mention the potential for secondary losses on other property-based loans such as those to firms which acquired trading premises formerly held on lease and so on. Similarly we should reckon upon significant losses on residential mortgages.

It seems altogether too reasonable to assume that the €90B aforementioned represents a baseline of cost. The real question to be addressed at this time is, if this is so and if we have “found” only about €64B of the “prime” element of the costs as detailed by NWL herein, then where lies the rest of this grumbling financial monster ?

In part it is masked by those borrowers who continue to service their obligations with indifference to the underlying capital value, whether as commercial or residential borrowers. This element is likely to pose an uncertainty for quite some time to come.

In part also, it is masked by those loans which were to be taken out to NAMA but which, due to the belated realisation on the part of the financial wizards responsible for conjuring up NAMA in the first place that such transfers would generate perhaps a further €30B in realised losses, now lie grumbling to their own beat within the guaranteed institutions.

As matters stand, we can therefore expect to be charged with a further imposition totalling no less than about €30B whether in terms of a closing deficiency on NAMA, further injections into the guaranteed institutions or an excess of cost imposed by these same institutions as they scramble to generate profits sufficient to absorb the pending losses.

Yet again it is appropriate to note that the cash cost thus far of our banking fiasco is but a small fraction of the ultimate cost. This being so, it is clear that our fiscal imbalance has little or nothing to do with banking. Instead it derives from gross mismanagement of our public finances. Is it necessary to say that whereas the current Government talks the talk in this regard, they have yet to start walking ?

This is not to say that our banking fiasco will leave us untouched. As every business person active in Ireland today knows, business is all but sedated by lack of access to working capital. This deficiency has generated grave uncertainty including even a marked unwillingness to engage in activities calculated to increase sales. In short, businesses are unwilling to spend on their own account and have difficulty in anticipating a spending capacity on the part of customers.

This domestic commercial paralysis mirrors the unwillingness to spend which is all too apparent throughout the Eurozone. Fellow EZ governments are subjecting their citizens to penury in circumstances in which their policies are crafted out of the same rigidity – deriving from the Euro-imposed inflexibility – which arose when governments generally sought to restore the Gold Standard in the 1920’s and 1930’s.

The Euro has replaced gold as the fixed element in our affairs in circumstances in which our currency – whatever it might be – should be the means whereby we leverage ourselves out of this penury.

In such an environment, prices, including labour rates, will begin to fall, leaving creditor balances unchanged. In this way, our obligations to our banks will increase in real terms. Continuing on our current course, we manage to increase the cost of the banking fiasco.

The obvious alternative is that we should allow the money supply to increase by, for example, funding bank deficiencies from within Central Bank resources. Contrary to the popular perception that the recent Summit heralded such an approach, the EZ Heads of Government merely acknowledged the possible. Nothing has yet been done nor, due to domestic political considerations in Germany, will any such thing be done in the short term. “Repeat after me” Angela will say, “Four Legs Good, Two Legs Bad !”.

These realities bring us to an unavoidable conclusion. It is time to stop pretending that we have a viable Single Currency. We do not.

It is time to stop pretending that we have a working Central Bank. We do not.

It is time to stop pretending that we will ever have a viable Fiscal Union. We will not.

It is time to stop pretending that we have met the cost of our banking fiasco. We have not.

It is time for us to take responsibility for our own affairs and to marshal the entire of our resources in aid of economic recovery. Win, lose or draw, let us rely upon each other and not upon economic methods that were last used and thereafter properly discredited over eighty years ago.

Such self-reliance would offer us the ability to shift the emphasis in our banking difficulties, away from the asset side of our banks’ balance sheets and onto their liabilities, specifically their deposits.

In any viable re-ordering of our affairs, the State should remove itself entirely from the banking sphere including as to NAMA. There is a very persuasive case for the non-application of State deposit guarantees which generally result in “Heads the Bank Wins, Tails we Lose” outcomes. Most people do not need commercial banking services and would benefit greatly from the availability of basic banking services such as those afforded by Poste Italiane, including debit cards, paypath options, direct debits, standing orders and so on.

These realities imply a necessity to achieve a transition to a more basic people-friendly and functional banking model which could be based upon our Post Office network. Those wishing to retain the benefit of the State’s guarantee could be encouraged over time to shift their banking requirements to such a simpler model. In this way, we could remove the State from the business of banking.

In such circumstances, though the State might well be required to sit as a creditor within the existing banks in lieu of some former deposits, any mention of the likely cost of this or that element of the banking fiasco could be answered with a general and resounding “So ……?”

To those who would contend that the change in course which I recommend
would require the institution of Airgead Nua, I say “So……?”.

@L’Eagle –
In 1802 Thomas Jefferson said: “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered. ”

Fast forward 210 years and it is amazing how prescient ol’ Thomas was.

According to the Collins English Dictionary 10th Edition fraud can be defined as: “deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage”.

In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud.

So…. Let’s look at Anglo and its manipulation of DIBOR. For many years Anglo’s Treasury Department used an enhanced figure for DIBOR, thereby defrauding its customers by overcharging them. It did this across most, if not all, accounts.

The bank did this knowingly, but the only customer who picked up on it was a borrower from Kildare who used to arrive at the bank at three month intervals in an irate condition, complaining about the overcharges on his account. It seems that the rest of the bank’s clients were too busy spending Anglo’s largesse or too ignorant of the finer points of analysing bank charges. In any event, each time our friend from Kildare arrived, he was patted on the head, taken to lunch, fed a bottle of fine wine and was promised that it wouldn’t happen again…… until the next time.

The issue of the interest rate manipulation came to a head and erupted in major rows between Treasury and members of the Board when the wheeze was perpetrated out of the bank’s Boston office on its American clients. Only some of Anglo’s upper echelon realised that you don’t mess with the SEC or you get thrown out. The Treasury wanted the party to continue. I have not seen records of Anglo’s US loans over a sufficient period to assess how long the practice went on there.

Why hasn’t it been investigated? Who wants to add another €1 billion or more to the bill of already burdened Irish taxpayer – better to send out cheques quietly to the Anglo clients for “overcharges”, keep the cheques to the minimum amount that can be justified and hope that the recipients just say “Whoopee!” and don’t ask too many questions.

I look at the overpaid and hubristic barristers living in the ivory tower that is the Four Courts defending the Anglo borrowers against the bank’s demands and wonder what planet do they actually inhabit. All they can produce are pathetic, esoteric and impotent arguments in defense of fraud and deceit perpetrated on their clients.

Some day we may actually have a Woodward or a Bernstein – an investigative journalist worthy of the name. Then the public may actually learn the truth. Meanwhile – enjoy the mushroom treatment.

The longer I am in practice at the Bar the more I think that Karl Marx correctly described the function of law and the courts as being to protect the rich and powerful and keep the proletariat in place. Half-baked arguments that “Anglo was a fraudulent bank therefore I do not have to repay my loans” were always going to fail, but a forged signature on agreements to extend loan agreements was recently held not to invalidate the original loan (and guarantee).

More remarkably, Kelly J. in ACC Bank v. Fahey (2010) – http://www.bailii.org/ie/cases/IEHC/2010/H41.html – held that a fraudulently forged signature on a loan facility letter still left the principal (but not interest) to be repaid. A remarkably pro-bank judgment.

An individual borrower raising the TIBOR point would merely be given a credit for the excess interest he paid. No further civil consequences.

The truth is known to many but the courts do not want to hear. Instead the Little Man is asked, “But you got the money, right?”

The other European leaders must be just terrified of further negotiations with Enda,who depending which version you accept was just physically attacked/assulted by a female reporter…….can he make a bigger fool of himself.Best case the terms of the promissory notes get tweaked,it’s a done deal you own the debt,most of the unsecured bonds paid off.Comparing and complaining about someone’s else deal is a dead end.

Clearly the wrong person is negotiating,step forward Big Phil Hogan.
If he can negotiate almost 1 million loan for ten years interest only,he’s your man to handle debt negotiations,he clearly has flair and gift for it,a natural really,the loan is very very impressive,he must be some negotiator.This is after basically a lifetime in politics on a TD’s salary.What was the debt service coverage,this type of lending is not very endearing to your European partners.
The lending practices and standards in Irish financial institutions was abysmal did not even follow basic practices,such as can he pay it back or service the debt.Cleary,Hogan was incapable of servicing his debt with a normal market loan,so one more suitable to his financial situation was arranged/negotiated by him.
Any wonder there is little or no sympathy in the US or Europe for debt relief with a Govt. minister is in receipt of this type of largesse,he should resign immediately,more likely he will be slapped on the back a few guffaws by his fellow ministers,so put him charge of negotiations,never ever came across a ten year IO loan,never.
He must be one heck of a negotiator,unless……

Yesterday’s interview in the IT with a ‘senior Brussels figure’ tells the ESM story. It is the reality of the ‘game changer’ – the PR puff of Enda and Gilmore was just that. Nothing at all until an EU wide bank manager is in post, followed by the implementation of the fiscal rigour, and then, maybe, some relief, but on the EU’s terms.

‘gross’ is a bit 80’s although’hella gross’ is ok…but the latest, absolute latest is that SF only ever called San Francsico or The City, can now be called ‘sco…but only if you are really really cool, sorry hella cool.
But yes, those closed classrooms and those charvet shirts are indeed connected.

Honestly I can’t see what the fuss is L’Eagle,just pipe down; all this noise is preventing me from moving into a different space when it comes to understanding the role of banks, I must get re-educated by a politician….

@L’Eagle – Thank you for your response. You mentioned two points that I would like to comment on quickly (AWOL most of this week), but I would like to discuss Lender Liability more extensively with you in a week or so.

You wrote:
“An individual borrower raising the TIBOR point would merely be given a credit for the excess interest he paid. No further civil consequences.”

That is indeed the case in some but not all situations. Anglo lent to many SPVs (Special Purpose Vehicles) that only borrowed against one particular asset. When the asset was sold the SPV became dormant and as the loan expired the SPV did not transfer to NAMA. Anglo’s only option now is to write a cheque to the SPV. The cheque would have to reflect not only the accumulated liability but also interest on that liability to date. A credit is not an available option in these circumstances.

Your second comment below is an interesting one as it has been used by Judge Kelly in his decisions.

“The truth is known to many but the courts do not want to hear. Instead the Little Man is asked, “But you got the money, right?”

Judge Kelly states:
“The matter is put succinctly in ‘Chitty on Contracts’ (29th Edition) at para. 38-229, where it is said:

“If money is proved, or admitted, to have been paid by A to B, then in the absence of any circumstances suggesting a presumption of advancement, there is prima facie an obligation to repay the money; accordingly, if B claims that the money was intended as a gift, the onus is on him to prove this fact.”

Uhmm…. First question is who received the money? Was it a company, a Trust, a partnership or an individual? If Personal Guarantees of an individual are being pursued, it seems to me that unless the individual received the money personally, the presumption of an advancement does not stand. And in those circumstances it is arguable that any personal liability under a guarantee is tainted by the fraudulent actions of the bank.

I’m happy to take it up in more detail in a week, but other battles to fight for the next couple of days. :-)

IBRC currently sending out a virtual deluge of cheques to all Anglo’s old clients for “interest refunds”. I wonder if ti has anything to do with the DIBOR revelations on this website? That might be a little presumptuous, but it does seem more than a coincidence

To anyone receiving them, as well as cashing them, I would suggest the following:

Send a letter to IBRC to ask for the itemised details of the overpayment and their calculations in relation to it together with a copy of the account relating to it ab initio to date.

Then I would suggest hiring a forensic accountant with knowledge of DIBOR and calculating interest rates to check the payment. Also ask him/her to check the 360/365 divisor. It is money on that you will have been underpaid.

Some young accountant could do himself a favour by advertising his expertise on here.

“Files were then handed over to the Garda Bureau of Fraud Investigation. ACC Bank endeavours at all times to operate to the best banking practice and following the alleged forgery incident, the bank initiated extensive internal audits and engaged a fraud officer to strengthen measures in this regard.”

you couldn’t make it up, time to re-ignite the ‘lender liability’ debate?

[…] to tell us to tighten our belts and cough up for our debts. We (the Taxpayers) have given the banks €69.7 Billion in bail-out money so far (there’s plenty more to come). That works out at around €15,534 per every person in the […]